If you’ve been using IBD and the CAN SLIM® System for a while, you’re probably familiar with this investing truth: To make big money when the market is up, you need to prepare to profit while it’s down.

The reason is simple: The best stocks tend to form bases while the market is in a correction, then break out and move higher right when a new uptrend begins. So if you want to get in early on these stocks — at the start of their new price runs — you need to scout them out and build your watch list ahead of time.

As they say, nothing goes up forever. And by the time a stock has formed three, four or more bases, it could be running out of steam. While these late-stage bases can work, you need to understand that they're more likely to fail than a first- or second-stage formation.

You’ll find even more detailed analysis and ongoing chart markups in Leaderboard, where the IBD markets team continually highlights potential buy and sell signals for each stock on the Leaders List. (Learn more and take a free trial of Leaderboard.)

How to Count Bases

Once you understand the basic concept and what to look for, you’ll find it’s not hard to determine what stage pattern a stock is forming. Watch the video below to see how to do it.

Select market data is provided by Interactive Data Corp. Real Time Services. Price and Volume data is delayed 20 minutes unless otherwise noted, is believed accurate but is not warranted or guaranteed by Interactive Data Corp. Real Time Services and is subject to Interactive Data Corp. Real Time Services terms. All times are Eastern United States. *Reflects real-time index prices.